Bank Statement Loans

One-line summary: Mortgage loans that qualify self-employed borrowers based on bank statement deposits rather than tax returns, the standard option for business owners whose tax write-offs leave their tax return income lower than their actual cash flow.

Best for

Self-employed borrowers, business owners, 1099 contractors, freelancers, gig workers, whose tax returns understate their actual income due to legitimate business deductions. Especially relevant for borrowers who would qualify for far more loan on bank deposits than on adjusted tax-return income.

Key terms (typical)

Attribute	Typical Range
Income documentation	12 or 24 months of personal or business bank statements
Income calculation	Average monthly deposits, typically with an expense factor adjustment
Eligible properties	1–4 unit primary, second home, investment
Loan amount	Up to $3M+ depending on program
Down payment	10–20% typical
Credit score	660+ typical; 700+ for best terms
Term	30 years fixed; ARM and interest-only options available
Reserves	6–12 months PITI typical

Why borrowers choose this program

• No tax returns required. Underwriting uses bank statement deposits, not Schedule C or business returns, the most common pain point for self-employed conventional applicants.
• Higher qualifying income. For borrowers whose deductions are real but legitimate, bank statement income is often substantially higher than tax return income.
• 30-year fixed available. Despite being non-QM, most bank statement programs offer full 30-year fixed terms, not just short-term ARMs.
• All property types. Available for primary, second home, and investment property purchases.

Considerations

• Higher rates than conventional. Bank statement loans typically price 50–150 basis points above conventional. The premium pays for the documentation flexibility.
• Larger down payment. Most programs require 10–20% down; very few go below 10%.
• Expense factor reduces deposits. Lenders apply an expense factor (often 50%) to business bank statement deposits to estimate net income. The income on the application may be lower than gross deposits.